Hello Tango:
Lets address some of your concerns, they are very valid.
Burn rate is estimated at ~$200,000 month, this estimate is on the high side. The company had ~500,000 in the till and just raised another ~450,000, which the President, Nasim Tyab, put into the company via private placement. Sales currently account for ~100,000/month and are ramping up significantly on a week by week basis. The company is financially ok for approx. the next 4-8 months.
But I agree with you, an additional financing is needed, and
speaking with Senco Management, a future financing is indeed
planned. IPO Capital has an eight page buy report on Senco
and it is my bet that this Broker/Dealer will lead the future
financing on Senco.
As for your point of Senco being a one product company. Senco has
been working on a Model 2 detector which is a cheaper, more retail oriented product, that should be priced around the $35/$40 range
and will still maintain a good profit margin for Senco. Also a combo
smoke/CO detector is planned in the future.
As for Senco having problems entering the US market because it is a one product company.
The Answer: only time will tell. But Senco has had a huge amount of success with the Utility Market (ie. BC Gas, Nova Scotia Power, Consumers First, Brampton Hydro). Senco has also had success with Canadian retail accounts, such as TimBr Mart, The Bay, Home Depot. I feel it is only a matter of time before you see the Senco Product in US and European Utility and Retail outlets. For example, the Home Depot account in Canada encompasses approx. 27 stores, where as in the US there are over 1600 Home Depot stores. I see an easy transition into the sister stores in the US. It is only a matter of time.
An order from this type of chain (Home Depot) in the US could dramatically impact Senco's bottem line numbers. Senco's business plan estimates the worldwide sale of 350,000 detectors this year, of which 250,000 are to the US. I am confident that you will see US based sales materialize, the question is of what magnitude.
Your last point is that the Senco Technology is NOT protected. Senco Sensor's holds all the patents to its model one detector. Here is some background to the technologies that encompass the CO detector market.
Underwriters' Laboratory (UL) is the leading North American
product safety testing and standards setting organization maintaining
a policy standard for single and multi-station CO detectors. UL
listed residential CO detectors that are currently manufactured by
the major competitors in the industry utilize primarily Biomimetic or
Metal Oxide Semiconductor (MOS) technologies. Both of these
technologies have significant drawbacks. Electrochemical sensing
technology is being employed, but with less frequency. Those
detectors currently available, that utilize electrochemical sensors,
are facing obstacles that Senco will address.
Biomimetic detectors have been linked to frequent occurrences of
false or unexplained alarms, due to cumulative readings resulting
from the sensor's slow reset capability. Although this technology can
measure lower levels of CO, the sensor may require up to 48 hours
to reset and carries a warranty of only 2 years.
The primary disadvantages with MOS technology include cross
sensitivity and the loss of sensitivity over time. Cross sensitivity as been linked to false alarms. Another problem with MOS technology
is the sensors' inability to read below 100 PPM. The manufacturers
of MOS based detectors warn against this problem, recommending
consumers use more sensitive detection devices if protection is
required below 60 PPM. Groups that require such protection
include infants, pregnant women, seniors and persons with
respiratory ailments. The Occupational Safety and Health
Administration (OSHA) has warned against the dangers of
low-level exposure.
The electrochemical detectors that are on the market today have
been placed at a very high price point, because the detector
manufacturers are purchasing the sensors from outside sources. In
addition, these costly units contain sensors with a life span of only
two years, and require buyers to continue to purchase sensors
periodically.
CO detectors have proven to save lives, but there has been an
excessive and unnecessary demand on fire departments due to false
alarms. The technological limitations of CO detectors currently in
the marketplace have raised questions of reliability. There has been
recent press coverage about the limitations of the detectors currently
available. An article in the January 1998 edition of Popular Science
Magazine titled Carbon Monoxide Detectors: What You Need to
Know, effectively outlines the drawbacks associated with each type
of technology.
SENCO's Solution:
Senco Sensors has developed a digital carbon monoxide detector
with a special low-level alert feature. By utilizing proprietary
electrochemical sensor technology, Senco's detector offers many
innovative features. Most significantly, the detector - named ONE -
monitors for high-levels and prolonged low-levels of CO, because
of its impressive accuracy, response time, and monitoring range.
Current medical literature on CO poisoning indicates that exposure
to low-levels of carbon monoxide over an extended period of time
may contribute to significant health problems, such as heart and
brain damage. Newborns, infants, and the elderly are especially at
risk, and special care should be taken to alert their caregivers of
potential CO problems. ONE continuously monitors for dangerous
levels of CO, and in the event of prolonged low-levels will display
and sound an alert. ONE has been tested by Underwriters'
Laboratories Canada (ULC) to monitor for prolonged low-levels of
CO, and to alert consumers when those conditions exist.
An important feature incorporated into ONE's display is the
'ACTION ICONS'. These icons give the user more comprehensive
information than conventional detectors which only show CO
readings in parts per million (PPM). 'ACTION ICONS' indicate
alarm conditions at a glance, and will remain displayed until the unit
is reset. Should the alarm have sounded while the home's occupants
were away, the icons will remain in view so that the user will know
that dangerous levels of CO caused an alarm in their absence.
In the product design, Senco is addressing the problems associated
with current detector technology and user complaints. In short,
Senco is listening to licensing bodies and consumers to deliver a
reliable and accurate CO detector to aid in the prevention of
accidental deaths and injuries caused by the "silent killer."
I hope this does alot to answer your questions. Remember I am just a
sofisticated investor you likes to take equity positions in companies that have a chance of appreciating in price. The only bias I have is that I am an investor in this company. I do appreciate all viewpoints.
cheers,
RTM |
